Oct 12, 2011

Disney India, which already owned more than half of Indiagames, announced plans recently to acquire a further 30% in the company. So how does this measure up?

VCCircle has done an analysis of the likely valuation and returns to shareholders. It certainly bodes well for the Indian entrepreneurship and early-stage investment ecosystem that a long-standing player has gone through an M&A process successfully, achieving a good-sized valuation with a global player as the buyer. Terrific.

However.

Cisco and Adobe, two of the company's investors, doubling their money in over six years? And unrealised at that. That's really not much of a return. It also isn't something for the management team to be particularly proud of. The investment hasn't gone to zero for sure, but it ain't no hit either and shouldn't be pitched as one.

Two caveats. One: I am taking VCCircle's numbers at face value here. Who knows, the investors might get a sweetener or two to up their returns. Even so, I don't expect this can help too much. And two: if we separate the investment returns from the company's own needs, I think this transaction makes eminent sense for the company. No arguments there.

Note that I don't foresee my firm investing in the gaming or content business because we (meaning, I) don't think we have any particular expertise at picking games or other content that will prove to be winners. I'm making a generic observation here about return requirements in the VC business.

Also, VC is certainly a "hit business" as Luke Johnson says, meaning "disproportionate rewards accrue to the most successful participants, while a substantial majority earn peanuts". The ratio of successes to so-so investments and failures is generally highly skewed. One way to mitigate the risk of investing in, er, non-hits is to focus on stuff you know. I certainly am more comfortable assessing technology businesses than I am predicting the tastes of the average gamer.

Sep 27, 2010

Ok, I figured out the answer to the conundrum I just posted. If you think you know the answer and want to compare notes, leave a comment. Better yet, email me directly so that you don't spoil the fun for others!

Jun 02, 2010

At Echelon 2010 in Singapore yesterday and today. Vishal Gondal of Indiagames and others on the social gaming panel point out opportunities for social gaming beyond just the PC Internet and beyond Facebook specifically.

Non-Facebook social networks around the world, such as Mixi, Renren, Cyworld, etc

Mobile social games

Interactive TV

Zaki Mahomed of Game Ventures thinks that payments still is a barrier to seamless roll-out and adoption of social games in Asia and on the mobile. He says there's no one simple way across games and platforms (OSs, devices, whatever) to make it easy for users to micro-transact within games. People aren't comfortable typing their credit card numbers into a mobile social game. Vishal agrees but with the qualification that in India at least premium SMS is one way to monetise.

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